Kaiser-Permanente: A Model American Health Maintenance Organization

Abstract

The Kaiser-Permanente medical care program, a prepaid group practice that has been operating in California for over 30 years, is one of the most successful Health Maintenance Organizations (HMOs) in the United States. Kaiser's membership in California, Portland, Hawaii, Denver, and Cleveland exceeds 2.5 million. The main success that HMOs can claim is cost reduction. Kaiser can provide a package of services at lower cost than identical services would cost in “mainstream” medicine. The way in which an HMO reduces cost is by lowering the use of services by its members. Kaiser members spend half as many days in the hospital as a similar population of Blue Cross/Blue Shield subscribers. But Kaiser also tends to lower the availability of services that are not presently performed in excess. Ambulatory care is not easily accessible-large numbers of patients complain of waiting several weeks for appointments, of receiving rushed impersonal treatment, and of being unable to find and keep a personal physician. Thus Kaiser cost reduction goes hand-in-hand with a general inaccessibility of services. The reason for this is the working of the profit motive. Whether for-profit or technically “nonprofit,” private corporations have always committed themselves to maximizing their income, reducing their expenditures, and using the surplus for expansion. The profit incentive leads private HMOs to limit services by hiring an inadequate number of physicians and other personnel so that patients will be discouraged from seeking care. In this way, expenses go down and surplus goes up. This is a revision of an article, “Kaiser Plan,” that appeared in the Health-PAC Bulletin, No. 55, pp. 1-18, November 1973.